Hastings wins Port of Newcastle in $1.75bn deal

NSW Premier
Mike Baird
will push to privatise the state’s $25 billion electricity grid after reaping a hefty $1.75 billion from the sale of the Port of Newcastle, most of which will be invested back into infrastructure.

“This momentous result exceeds all expectations," Mr Baird said.

He refused to comment directly on whether he planned to go ahead with a privatisation of the state’s electricity grid but said the successful sale of the Port of Newcastle could help build support for “recycling" assets on the state’s balance sheet.

Mr Baird said the community view was: “If you get a good price for it and you put it into good projects for us, then we are happy to trust you."

The price paid by infrastructure group
Hastings Funds Management
and a Chinese state-owned corporation, China Merchants, for a 98-year lease of the port was well above the forecast sale price of about $1 billion.

The sale will add $1.5 billion to the state’s Restart NSW infrastructure fund after repayment of debt and provisions for other liabilities. Mr Baird has already pledged $340 million for a light rail line in downtown Newcastle, adding it would turn Newcastle into the “jewel of the Asia-Pacific".

But with a pre-election budget due on June 16, Mr Baird said the sale would give his government “more flexibility" to fund other projects.

Cash from asset sales would be put into the “right kind of infrastructure structure" and not on the basis of “what seats you needed to win", he said.

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The Liberals won the traditionally safe Labor seat of Newcastle at the last election and hold it with a margin of 2.6 per cent. The state government is looking forward to the details of the federal government’s plan to give a 15 per cent incentive to states that sold off assets and invested in infrastructure but it would only apply to future sales.

Brendan Lyon, executive director of Infrastructure Partnerships Australia, said the sale should encourage other states to sell off assets to fund infrastructure. “This is a template that other states should be watching closely," Mr Lyon said.

The $1.75 billion price for the Port of Newcastle represents a multiple of 25 times expected 2013-14 financial year earnings, similar to the government’s $5.1 billion sale of Port Botany and Kembla, underscoring the continued strong demand for infrastructure assets. It is also a vote of confidence in Australia’s coal export industry since Newcastle handles 41 per cent of all coal exports.

Hastings and
China Merchants
, which owns Australian logistics group Loscam, are equal partners in the port investment, with each holding a 50 percent stake. It is China Merchants’ first infrastructure investment in Australia.

Hastings expects to expand the port amid expectations demand for Newcastle’s relatively high-quality coal will continue from Asia. The $1.75 billion windfall will balance the loss to the NSW’s budget after the $1.5 billion sale of power generator Macquarie Generation to
AGL
was blocked by the Australian Competition and Consumer Commission. Mr Baird said the Macquarie deal was still “open" because AGL had appealed the decision to the Australian Competition Tribunal and he was talking to under-bidders such as
ERM
which might increase their bid.

The ACCC and the Foreign Investment Review Board have already approved the Port of Newcastle deal.

Standard & Poor’s has the state’s AAA credit rating on negative watch and has said it wants some of the proceeds of asset sales used to reduce debt.